Copper, Aluminum Fall to Three-Year Lows on Bulging Stockpiles

By Claudia Carpenter

Nov. 12 (Bloomberg) -- Copper and aluminum fell to three- year lows in London as bulging stockpiles heightened speculation that miners need more output cuts to match slowing demand led by China, the world's biggest buyer of both metals.

Aluminum inventories in warehouses monitored by the London Metal Exchange have jumped 67 percent this year to the highest since 1995 and copper supplies are the highest since 2004. China's aluminum demand may grow 2 percent or 3 percent next year, the slowest pace since 1997, Wang Feihong of Beijing Antaike Information Development Co. said in Beijing today.

``Inventories are going up and China's not looking great,'' said Jon Bergtheil, an analyst at Citigroup Inc. in London. ``That's what's worried the market in copper for the last two or three weeks.''

Copper for delivery in three months fell as much as $70, or 1.9 percent, to $3,570 a ton, the lowest since Sept. 19, 2005, and was at $3,620 a ton as of 12:05 p.m. local time. Aluminum dropped as much as $29 to $1,919, the lowest since Oct. 24, 2005.

European industrial production declined 2.4 percent in September from a year earlier, the biggest decline since February 2002, the European Union's statistics office in Luxembourg said today. From the previous month, production dropped 1.6 percent, led by Germany, the world's biggest third-largest copper user after China and the U.S. in 2007, according to the International Copper Study Group in Lisbon.

``It's more or less the same for all the industrial metals: they're suffering from economic slowdown, inventories are recovering and demand is coming down,'' said Jochen Hitzfeld, an analyst at UniCredit SpA in Munich. ``We will see a lot of production cuts coming in the next few months'' that will slow the declines, he said.

Aluminum Forecasts

UniCredit forecasts aluminum will average $2,150 a ton next year, down 22 percent from this year's average, and copper at $5,000, 33 percent lower.

``Aluminum is now between 20 and 30 percent below production cost -- they will cut back,'' Hitzfeld said.

Codelco, the world's biggest copper producer, has cut surcharges for metal sold next year in Europe, Japan and South Korea to keep market share as global growth slows. Codelco lowered its surcharge for metal sold next year to $65 a ton in Japan and $64 a ton in South Korea, according to four industry executives who saw the notice to clients today. In Europe, the fee will be $80 a ton.

Stockpiles of copper gained 4,625 tons, or 1.7 percent, to 270,100 tons, the 16th consecutive increase. Aluminum stockpiles jumped 6,125 tons to 1.56 million tons, the most since Jan. 31, 1995.

Lead for three-month delivery was unchanged at $1,280 a ton and tin dropped $225 to $13,950 a ton. Nickel gained $95 to $10,800 a ton and zinc rose $15 to $1,125 a ton.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net